Buy the rumor sell the euro?

The recent risk rally continued today on the back of a successful passage of Greek austerity measures. EUR/USD traded from lows around 1.4330 to end just short of its daily highs around 1.4445/50. However, the Greek debt story is far from over as tomorrow’s implementation vote will be the next chapter in this seemingly endless saga – the bill is more than likely to pass which paves the way for Greece to receive its latest installment of EU/IMF aid estimated to be around 120 billion euros. However, it also paves the way for a potential ‘buy the rumor sell the fact’ type reaction as recent EUR gains seem to be underpinned by anticipation of successful austerity votes and thus may already be priced in.

The technical picture in EUR/USD also suggests recent gains may be in the process of exhausting:

Negative price/MACD divergence on hourly charts – highs in price are not being confirmed with highs in MACD as was the case from June 17th to 22nd which saw a subsequent rejection from the 1.4450 level.
1.4450/60 – 61.8% retracement for the recent 1.4695/00 to 1.4070 decline & 50% retracement for the broader 1.4940 to 1.3965/70 decline.

Worth a thought: Buy the rumor sell the euro?

As the NY session drew to a close, EUR/USD managed to hold onto gains but upside was continuously capped ahead of the 1.4440/50 level. If ‘buy the rumor sell the fact’ activity materializes, the 1.4425/50 resistance zone may provide decent risk/reward value for shorts targeting a move back down towards the recently supportive 100-day sma (currently around 1.4210) with stops placed around 1.4565.

Source: Forex.com

29.06.2011